Pfizer's "Crown Jewel" Lipitor: Has It Lost Its Value?

The world's biggest drug company kicked off pureplay pharma earnings season this morning with disappointing results that look to be dragging down the whole sector. PFE missed Wall Street expectations on revenue and profits.

But it's still standing by its full year earnings guidance which officials maintain they can engineer on the back of things like cost cuts, stock buybacks and foreign currency exchange rates. For example, the company says it got rid of another 1,600 workers in the first quarter.

Pfizer has to continue tightening its belt because sales are going down. Even what had been a beacon of new growth, the stop-smoking pill Chantix, saw sales dip ever so slightly--down $3 million sequentially.

Okay, that's a drop in the bucket for a company as big as Pfizer. But investors expect revenue from promising new drugs like Chantix to go up, up, up. The pill is facing psychiatric safety concerns which I think could eventually lead to the Food and Drug Administration putting a so called "black box" or the stiffest of safety warnings on the Chantix label.

But for Pfizer it's really all about the world's top-selling drug, Lipitor for cholesterol. In the U.S. in the first quarter sales of that statin fell a whopping 18 percent from the same period a year ago. And from the fourth quarter of last year to the first quarter of this year Lipitor revenue went down $300 million. On the conference call, a Pfizer executive said that statin sales growth is slowing from the mid- to high-single digits to the mid-single digits or slightly lower.

Apparently, as doctors and health officials feared, the Vytorin-Zetia fallout may be scaring away people from taking a statin. On top of that, Pfizer officials believe that many Vytorin-Zetia patients are being pushed by health insurers to switch onto much cheaper generic Zocor instead of Lipitor. But they say they're confident that when those patients find that they're not reaching their cholesterol-lowering goals on the generic that their doctors will eventually put them on Lipitor. We'll see.

One small bright spot: worldwide Viagra sales went up six percent. But not since before the FDA approved Viagra have PFE shares been trading so low. At this level, you can get a six to seven percent dividend yield on the stock and on the call the CFO said the payout is "sustainable and potential negative effects can be mitigated".

Analysts have pushed out a bunch of research notes to clients this morning on PFE, but I think the one from Miller-Tabak's healthcare guy Les Funtleyder is the most quotable. He writes: "With PFE it has been a case of 'Waiting for Godot' (the character in a play who never shows up) in that investors continue to look for the major shift in strategy that will reverse the negative momentum. PFE is becoming close to losing its crown as the world's largest pharmaceutical company...."